Tax-And-Spend Plans Would Ruin State Economy

Published March 16, 2009

Apparently our new governor and state lawmakers are not satisfied that they and their predecessors have driven Illinois to the brink of fiscal disaster. Their latest tax and spending proposals indicate they are willing to take the state beyond the brink, off the cliff and into the abyss.

Gov. Quinn last week announced he wants to spend up to $26 billion on a statewide “capital” construction program for school buildings, roads, bridges, and other infrastructure. He promised details in his Wednesday budget address, but we don’t need the details to know this is a bad, and indeed reckless, idea.

Illinois already has a budget deficit between $9 billion and $11 billion; a general obligation debt of about $22 billion (up from $7 billion when Quinn’s disgraced predecessor, Rod Blagojevich, took office just six years ago); recent downgrades of the state’s creditworthiness, and a requirement to pay back in less than three months $1.4 billion the state borrowed last month in the short-term municipal market. No wonder state Comptroller Daniel Hynes warns Illinois will end the fiscal year in “dire circumstances.”

Hynes reported the state may have to push $3 billion of outstanding bills for Medicaid and other services into 2010, leaving businesses that do work for the state hanging. Meanwhile, the state’s economy weakens further and more jobs disappear.

Quinn has been open to lawmakers who suggest raising the state income tax at least one percentage point, from 3 percent to 4 percent (a 33 percent rise) and possibly up to 5 percent (a 67 percent rise). Hikes in the state’s corporate income tax are also being discussed, plus higher gasoline taxes.

A one percentage point increase in the state income tax would take another $4 billion from taxpayers. A two-point hike would confiscate another $8 billion.

These taxes will drive even more business out of state and kill jobs.

According to “Facing Facts 2009,” a report issued earlier this month by the Civic Committee of the Commercial Club of Chicago, “politicians in both major parties, over many years, have failed to manage the State’s affairs and finances consistent with the interests of the people who live and work in this State. … They have managed the State’s affairs to promote their own interests and political fortunes — by providing unsustainably costly benefits to the State’s employees and enriching influential contractors, by passing popular but expensive programs, and by shifting the cost burden of these programs to the future through borrowing or by simply ignoring the growing unfunded commitments.”

As a result, unfunded debts — government employee pensions, health benefits, and other obligations — total more than $116 billion, or nearly $10,000 for each resident, and could climb $10 billion a year.

Similarly, “A Fiscal Roadmap for Creating a Sustainable State Budget,” released last week by the Civic Federation, recommends among other things:

• • No increase in spending. The state should cap or reduce spending.

• • No increase in the income tax to fund new programs and no increase unless the money is reserved to reduce existing state liabilities.

• • No new capital spending program without a transparent plan that identifies and evaluates infrastructure priorities.

A huge new spending program while the state has an appalling budget deficit and mountain of debt would be irresponsible in the extreme, using billions more of our tax dollars to paper over the problems our lawmakers have caused.

Steve Stanek (sstanek@heart is a research fellow at the Heartland Institute.